F v F FAMILY DIVISION The Independant 26 February 1996, (Transcript: Beverley Nunnery) HEARING-DATES: 12 JANUARY 1996 12 JANUARY 1996 COUNSEL: A Taylor for the Petitioner; B Singleton QC and L Stone for the Respondent PANEL: HOLMAN J JUDGMENTBY-1: HOLMAN J JUDGMENT-1: HOLMAN J: At the outset of this judgment I would like to thank the advocates on both sides, not forgetting Miss Stone, for the very great assistance they have given me during the course of a complex and difficult case. Introduction and background Mr F, whom I will call the husband, was born in March 1939 so he is now nearly 57. Mrs F, whom I will call the wife, was born in April 1940 so she is now nearly 56. She is Finnish but was already living in England when she and the husband met. They married on 18 February 1972 when each was in their early thirties. I regard the marriage as having effectively ended in November 1994 when the wife's solicitors wrote to the husband saying that she wished to divorce and his solicitors replied that he was shocked by the decision. Thus the effective duration of the marriage was just under 23 years, which I regard as a substantial length amongst those marriages which ultimately end in divorce. Their one child, P, was born in January 1974 so she is now aged virtually 22. She is in full-time employment. Before the parties met, the husband had started his business in the supply of medical instruments and products which led to his present means. In 1982 the business, by then known as IMED, was sold to Warner Lambert and the husband's share of the proceeds was about US$4.6 million gross which has since been invested in various ways. The husband has continued to work in consultancy and other capacities in the general field of medical and scientific equipment and supplies. But in September 1993 a company, Transatlantic Bio-Sciences Limited, purported to dismiss him from an executive post and since then he has had little remunerative employment. The wife has not been in remunerative employment during the marriage, and says that the husband did not wish her to work. She contributed neither capital nor income at any stage to the marriage. During the marriage the parties have lived in three homes. From 1972 until 1980 they lived in a four-bedroomed house in Virginia Water called Beestones. In 1980 the husband sold this house and bought, in their joint names, Brackenmoor, also in Virginia Water. Although it only actually has three bedrooms it is clearly a substantial house from the description in the sale particulars at Bundle C page 207. Fairly soon after they moved in they built a swimming pool and sauna in the grounds. In October 1993 they bought, in their joint names, a house known as Little Colstrope at Hambleden, a few miles north-east of Henley. Although a good quality house, it was in very poor condition and since then a huge amount of effort and about #500,000 in money has been spent on doing it up into the large and fine house which it is today. Meanwhile, in 1994, Brackenmoor was sold for #525,000. Whilst Little Colstrope was being done up the parties lived in a cottage in the grounds, and in fact it was only after the commencement of the divorce proceedings that they were able to move into Little Colstrope itself. Inevitably it must now be sold. Clearly, therefore, the wife needs sufficient capital with which to buy and equip an appropriate home. She has certain other capital needs, such as a new car. Any suggestion that at her age and with this background history she should now work is fanciful. So she needs an income-producing fund, both parties agreeing that this is obviously a clean break case. On her behalf, Mr Singleton has asked for a total of about £1.2m to £l.3m made up of £450,000 for a house, £30,000 for general removal and refurbishment costs, £13,500 for a new car (plus the trade-in value of her present one) and £700,000 as a Duxbury-type fund if a real rate of return of 4.25 % is taken and #790,000 if a real rate of return of 3 % is taken. On behalf of the husband, Mr Taylor has submitted that her reasonable needs total about £615,000-£650,000 made up of £280,000-£310,000 for a house, £10,000 for removal expenses, £310,000-£320,000 as a Duxbury fund, and £13,500 for a new car. But the husband further contends that those figures should be discounted to reflect her alleged lack of contribution during the marriage and various alleged issues of conduct to which I will later refer. So the gap between the parties' open positions, at least, is very large. I regret that the proceedings got off to a very bad start. The wife's solicitors wrote a model letter on 14 November 1994 (page 1 of the correspondence bundle) which I quote in full. "Dear Mr. F, "I have been instructed by your wife, who has sadly reached the conclusion that your marriage is at an end and asked me to issue divorce proceedings. I would be grateful if you could write to me with the name and address of your solicitors as soon as possible in order that I might contact them to discuss divorce and future arrangements between you and your wife. I look forward to hearing from you shortly." Unfortunately, the first action of the husband, through his solicitors, was to issue a behaviour petition and then to reply on 24 November 1995, at page 2 of the bundle as follows: "I refer to your letter of 15th November 1994. I am instructed by Mr. F. Mr. F instructs me that, notwithstanding your client's withdrawal from the marriage for in excess of 10 years, he was shocked by your client's decision. He would certainly not, he instructs me, move to a vastly more expensive home a few months ago and spend vast sums on improving it largely to meet your client's demands had he known this was what she had in mind. In the circumstances, and to put the record straight, my client has issued a petition which will be on its way from the court to your client." Since at that stage there was no "record" to "put straight" this was a very regrettable step which seems to have set the tone for all that has followed. The wife's solicitors endeavoured to propose a simple compromise of the suit on the basis of the husband's recent adultery. But his solicitors said that this was "the purest speculation" and that the husband "has no romantic association and is not prepared to facilitate an alternative cross-petition." In fact he was by then in a romantic (if not by then sexual) relationship with Angela F (the surname is purely coincidental) as well has having had a number of sexual relationships with other women. Further attempts by the wife to compromise the suit were all rebuffed until the very day of the pre-trial review at Reading County Court on 5 April 1995 by which time some thousands of pounds in costs had clearly been wasted in these skirmishes. By the time of the hearing before me the inter-solicitor correspondence ran to over 450 pages together with eight lever arch files of pleadings, documents and reports. By 19 December 1995 the wife's costs had reached £172,000 plus unquantified, but clearly substantial, fees from Savills and Coopers and Lybrand, so that her total bill will not be far short of £200,000. By 11 December 1995, which was the first day of the hearing, the husband's costs had reached £96,000. But with refreshers and solicitor's attendance throughout the ensuing six days, and with unquantified but also clearly substantial fees from Cluttons, Coopers and Lybrand and an expert, Mr Walker, his final costs look likely to exceed £110,000. So in all at least £300,000 has been spent on these proceedings. Of course, until I know the nature and content of any Calderbank (see Calderbank v Calderbank [1976] Fam 93, [1975] 3 All ER 333) correspondence I cannot properly judge where responsibility for all these costs lies. But it saddens me greatly that these two decent people have been locked into a combat which has been so very financially as well as emotionally costly. During the hearing itself I observed each of them visibly wilt before me, and I am sure that for each of them it has been a terrible ordeal and strain. Contributions and conduct It is convenient to deal first with paragraphs (f) and (g) of s.25(2) of the Matrimonial Causes Act 1973. There is no issue or doubt about the contribution of the husband in this case. Starting from very modest beginnings, he has worked very hard over many years and the assets which are now available to this family are entirely due to his business acumen and efforts. By way of defence to some of the allegations made against her, the wife says that the husband showed little interest in P, at least in the first few years of her life. But I do not think that is fair and I am satisfied that the husband took as much interest in P, and gave her as much of his time, as his busy work commitments and the demands which they made on his energies allowed. As for the wife, she does not suggest that she made any financial contribution or that she helped in any significant way with the business. But she says that she contributed fully to the welfare of the family by looking after the home and caring for P and the husband. The husband agrees that as a mother to P the wife played her part to the full. But he says that "apart from that the wife has not been willing significantly to contribute to a marriage which has, for about 13 years, been a marriage in name only." I quote from para 14 of his affidavit of 10 April 1995 (Bundle B page 28), and in the ensuing page he elaborates his case. In essence he says that despite the provision of help in the house and garden she herself was unwilling to do anything for the husband. She would not give him breakfast or other meals; she discouraged his family and friends from visiting; and she gave him little or no support in business or other entertaining. Closely linked with this complaint is the allegation of conduct that to the husband's great distress she refused to have another child after P, and that she refused him all affection or sexual intercourse from about 1981. Having listened to extensive oral evidence from each of the parties I do not find the thrust of these allegations proved. I am quite satisfied that there was no lack of contribution by the wife, or conduct by the wife such as now to reduce or minimise her entitlement. I could discern no reason for disbelieving the evidence of the wife whereas I regret to say that on certain issues the husband has clearly been evasive or less than frank if not actually lying. The admission that over many years he has had casual sexual encounters with other women, including from time to time visiting prostitutes, had to be dragged from him in cross-examination. He ultimately admitted that para 1 of the Particulars under para 8 of his Reply (see Bundle A page 20) was untrue when he had said that he denied having had associations of an improper nature. Although it relates to finance and the situation post-separation, he was clearly lying in cross-examination about spending money during recent holidays abroad with his girlfriend Angela F. It is obvious that cash withdrawn from his Swiss account with the Union Banque Suisse at Geneva Airport and at Verbier and Zermatt in March and April 1995 (see statements at Bundle E pages 405 and 406) was holiday spending money. Indeed, at the end of the second week's holiday he actually redeposited 960 Swiss Francs at Geneva Airport, obviously representing unspent money. But because the sums withdrawn were greater than his claimed holiday expenditure in a schedule at Bundle E page 389 he resolutely maintained that the withdrawals were not holiday spending money but that he "would have converted them into Sterling and brought them back to England". I found this totally unconvincing. On the specific issue of sexual intercourse he admitted that they had in fact had sexual intercourse, at least on holidays, much more recently than he had claimed in para 15 on page 15 of his affidavit at Bundle B page 29. It is common ground that there has been no sexual intercourse since a holiday in Barbados in 1990. By then the parties were using separate bedrooms at home because of the husband's heavy snoring for which he in fact sought medical help. As to having a further child after P, the wife did in fact become unintentionally pregnant in 1977. But it is clear from hospital records that the pregnancy was terminated with the agreement of both parties on medical advice since a contraceptive coil had been displaced (see letter of 3 February 1977 from a consultant, Mr Trickey to the general practitioner, Dr Loxton at Bundle G page 154 and the hospital records at Bundle G page 158). The loop was removed and I accept the evidence of the wife that after that the husband voluntarily and willingly used a condom until she underwent a hysterectomy in 1984. There was a specific issue about how much each contributed to overseeing the work at Little Colstrope. But this was resolved by the husband agreeing in evidence as follows: "I put a great deal of work into the renovation of Little Colstrope including immersing myself in technical detail, but I agree that she also took an interest and gave such help as she could." Faced with the statements of a large number of witnesses on behalf of the wife to the effect that the marriage was a happy one, with the wife playing a full part, the husband said that this was merely because they kept up a good front for the sake of convention and appearances. He said, "Externally we lived a life as a couple but internally we had separate lives." He said he simply kept the marriage going for the sake of P. But I did not find this convincing; nor does it explain why he bought Little Colstrope at great expense and then spent so much on it at the very time when P was leaving home. He initially maintained that he only did so under great pressure from the wife, but he later agreed as follows: "We both liked Little Colstrope very much. We were both keen to move there and do it up. My wife asked me whether we could really afford to do so. I told her we could." I accordingly proceed to consider the case on the basis that this wife is, to use the rather unattractive but nevertheless expressive jargon of family lawyers, a "fully entitled wife" and I shall make no discount in her award on the basis either of "conduct" or other lack of contribution by her to this marriage. Equally, however, it is not suggested on behalf of the wife (and nor do I find) that she made any special or unusually great contribution (as for example in Golkovic) so as to enlarge or increase her award. In his written closing submissions at para 2(g) Mr Singleton suggests that I should "take into account the general behaviour and attitude of the husband when considering where in the 'bracket' within which the award properly lies, to fix the figure." However, I decline to do this. The allegations made by the husband may be relevant when I come to decide costs. But I am not prepared consciously to increase the wife's award either to compensate her for having had to defend the allegations or to penalise the husband for having made them. Assets The nature and structure of the husband's assets is such that an attempt precisely to evaluate them is artificial. Overall, the assets in this case are in a bracket of £3,000,000 to £4,000,000. A substantial part of the husband's assets is a portfolio administered by Goldman Sachs which is worth around £1.5m, but the value of which fluctuated quite substantially even during the course of the hearing due to currency and market changes. There are a number of pictures whose acquisition costs, in some cases many years ago, total £58,000 but whose present value is likely to differ quite markedly from this. In these circumstances disputes such as whether the value of the parties' leasehold interest in 35 Clabon Mews is £167,500 (as the husband contends) or £175,000 (as the wife contends); and even whether the husband's freehold interest in the house at 163 Linden Avenue, formerly occupied by his father, should be taken at £95,000 (as the wife contends) or at £70,000 to discount for the elderly father's tenancy (as the husband contends) are of no consequence. Similarly, it is idle and unnecessary to speculate whether the husband may ultimately succeed in his claim for damages for his purported dismissal from Transatlantic Biosciences Limited. The litigation has a long way to go. At the very highest the claim is for £90,000 but meantime it is simply proving a heavy burden on the husband in legal costs. The only two issues of any significance as to capital worth are (a) estimating the husband's potential future losses as a former member of Lloyd's and (b) determining whether a deduction should be made for inherent Capital Gains Tax within the Zenith Trust. (a) Lloyd's losses Potential future claims against Lloyd's underwriters are notoriously difficulty to quantify or predict, the particular problem being to know what figure to ascribe to claims which have been incurred but not yet reported ("IBNR"). As Mr Singleton put it in his written closing submissions at para 4(h), "It is not going to be possible (nor perhaps is it necessary) for the court to arrive at a firm figure for the liability." On the evidence in this case the dispute has centred on two different approaches to the task of valuation of prospective losses. Mr JR Walker, an independent Lloyd's insurance consultant, gave evidence on behalf of the husband and put forward projected figures for the husband's potential losses on his particular lines in particular syndicates using the published projections of Chatset. Chatset has until recently been the only generally recognised organisation for establishing with any reliability possible future Lloyd's losses. Using Chatset figures the husband's overall exposure may be #454,288 on a best case, £514,288 on a worst case, and £484,288 on midrange figures. On behalf of the wife, naturally desirous to minimise the prospect of future loss, evidence was given by Mr Hallums, a senior manager with Coopers and Lybrand who spends a considerable amount of his professional time dealing with valuing for the purpose of taxation, Lloyd's losses. He acknowledged the historical and traditional authority of the Chatset figures, but suggested that a better basis now for evaluating the husband's potential future loss is the present plan for the Reconstruction and Renewal of Lloyd's by the establishment of a public limited company to be known as Equitas. At the moment this is no more than a plan strongly advocated by the Council of Lloyd's but subject to the acceptance of the affected underwriters. The object of the plan is in effect to reinsure past losses so as to quantify the loss for any particular name. But it does depend on names putting up more money and agreeing to drop all the current outstanding litigation against Lloyd's. As Mr Hallums said, some members will view Equitas as "throwing good money after bad". The Lloyd's Names Association's working party does not support the plan. Mr Walker said that within the Lloyd's market everyone would like to see Equitas come into being as a solution to the problems of Lloyd's but not if it is under-resourced. Thus, he said, the danger is that the Equitas figures are too low in the effort by Lloyd's to "sell" the scheme to Names and that in effect the present Equitas proposals under-estimate IBNR. On the basis of the Equitas figures and figures produced by the husband's syndicates, his potential liability may be limited to around £142,000. Only time will tell how the problems of Lloyd's Names will resolve themselves. When so much is uncertain, and when the possibility of Equitas being established depends upon the voting of Names and on so many other "political" factors, it would be idle and foolish of me to prefer one basis of valuation or the other. Further, the implications for tax repayment claims are complicated and speculative. If Equitas is established his ultimate exposure may be minimised but so also will the scope for tax repayments. In my judgment an allowance for the purpose of this case of £325,000 for future Lloyd's losses will strike a just balance between the contentions on behalf of each party and in the context of the totality of the assets will lead to an overall fair result. Even if that overstates the possible losses by £100,000 or even £200,000 it would not result in the award to the wife being less than it otherwise would be. Conversely, if it under-states the future loss by £100,000-£150,000 it will not lead to the wife receiving more than she otherwise would do. (b) CGT in Zenith Trust At page 19 of their report dated 2 November 1995 (Bundle C page 145) Newby Crouch have estimated the husband's overall inherent liability to Capital Gains Tax as being £147,188. To this must be added a further £40,740 from a revised calculation at Bundle C page 145(b) to take account of a revised agreed valuation for Clabon Mews. Thus the overall inherent Capital Gains Tax is around £188,000. However, this calculation includes within it tax on capital gains within the Zenith Trust, and since his personal capital gains are largely offset by capital losses the bulk of the £188,000 is in effect attributable to gains within the trust. The Zenith Trust was set up by the husband as a tax efficient method of holding part of his wealth within a non-United Kingdom resident trust. Since the relevant tax rules were changed in 1991 it would no longer be possible to do so again so it is highly tax advantageous to him to keep the assets within the trust. There is a dispute as to whether the element of Capital Gains Tax attributable to gains within the trust should now be deducted from an overall appraisal of the husband's wealth. The nature of the dispute is fully set out in paras 17-19 of Cooper and Lybrand's report dated 9 November 1995 (Bundle C pages 165 and 166), and in paras 5(a) and 6 of an agreed joint statement by Coopers and Lybrand and Newby Crouch dated 1 December 1995 (Bundle C page 168 (h)) Put very shortly, the point is that the Capital Gains Tax would not be payable if an asset is disposed of by the trust but only if a capital payment is made out of the trust to a United Kingdom resident beneficiary such as the husband. Thus, say Coopers and Lybrand, at Bundle C page 168 (h) : "It is possible therefore that if the Trust were left entirely intact in order to prolong the tax-efficient nature of the structure a liability to Capital Gains Tax would never arise during Mr. F's lifetime, such liability falling due only when the reversioner became absolutely entitled to the Trust assets on his death." Newby Crouch say, on the same page: "We agree with Coopers and Lybrand that the tax on realised gains of the Zenith Trust can be deferred until a capital sum representing those gains is paid to a United Kingdom resident beneficiary. However, Newby Crouch consider that if the assets of the Zenith Trust are included in the assets statement as part of Mr. F's personal wealth then the tax that would be payable in order to allow him to enjoy those assets personally should be taken into account. Otherwise the extent of Mr. F's wealth is over stated." On this issue I agree with the approach of Newby Crouch. In my judgment it would be wrong to include the assets of a trust such as the Zenith Trust as a liquid asset in the hands of the husband without making a deduction for the Capital Gains Tax which would be payable if the asset was actually placed in his hands. If, alternatively, the asset is to be regarded as available for the use of the husband but not actually capable of being in his hands to use entirely as he wishes without tax penalty, then the value of the asset would have to be subject to an appropriate discount. I accordingly propose to treat the assets in the Zenith Trust as if they are in all respects the assets of the husband but to deduct the Capital Gains Tax inherent upon them. Summary of assets The remainder of the assets are either agreed or, as I have said, raise issues too small to require detailed consideration. By way of brief explanation: (i) I take the value of the parties' leasehold interest in 35 Clabon Mews at £175,000, this being the figure the husband himself originally put forward on page 7 of his affidavit of 10 April 1995 (see Bundle B page 21); (ii) I take the value of his interest in 163 Linden Avenue at £95,000 since other documents at Bundle D pages 412(a) to (d) tend to suggest that the father, aged 92, has no intention of exercising his rights under the tenancy; (iii) In the husband's favour I assume that the figure of £4,592.65 on the "Register Report" dated 13 December 1995 at Bundle E page 393(c) is the most accurate and up-to-date figure for the funds in his Lloyd's Bank account number 0074232; (iv) I ignore entirely the possible fruits of the claim against Transatlantic since they are too speculative. But I also ignore as a debt the costs outstanding in respect of that claim, and I add back £13,400 being costs already paid on account in respect of that claim since the husband said in evidence that he hopes at least to recover his costs; (v) Paragraph (iv) on page 5 of a report by the husband's accountants, Newby Crouch dated 2 November 1995 (Bundle C page 131) implies that there are two remaining investments held by the Transatlantic Capital Fund partnerships A and B When the first of the three investments was sold the husband received £34,825. However, there is no evidence as to the value of the remaining investments, and I accept the evidence of the husband that he himself has very little information about them. In the circumstances I decline arbitrarily to assume (as invited to do by Mr Singleton on behalf of the wife) that the husband's share in the remaining investments is £34,825 and I can put no value on them; (vi) In the circumstances of this case in which the husband is aged nearly 57 and his pension funds are available at age 60 to produce a mixture of capital (if he elects to commute within the permissible limits) and income, and in which those funds are only a small part of a total income producing portfolio, I intend to regard the whole present value of the funds as a capital asset albeit that only part could ever be available to him as spendable capital. With those explanations, and taking a Dollar-Pound exchange rate where relevant of US$1.53 to £1.00 (as agreed) I take the overall capital as follows: Net equity in Little Colstrope 1,164,000 Net value leasehold interest in Clabon Mews 169,750 Zenith Trust (i) Net value freehold in Clabon Mews (subject to tenancy) 431,250 (ii) Other investments 141,850 Net value various industrial units 73,850 Net equity in 163 Linden Avenue 42,150 Goldman Sachs portfolio 1,500,000 Share options in Ethical Holdings (excluding those in Goldman Sachs portfolio) 133,000 Bank accounts 8,000 Savings Certificates 2,000 Added-back costs in respect of Transatlantic claim 13,400 London Life Insurance policy 39,000 Pension Funds 97,000 Lloyd's Underwriting deposit 156,000 Lloyd's liabilities (325,000) Capital Gains Tax inherent in above assets including Zenith Trust (188,000) Income Tax liabilities (34,000) Total 3,424,250 I propose to round-down that figure to £3,400,000 which I take as a reasonable approximation, fair to both parties, of the overall wealth of this husband apart from contents to which I refer separately below. Costs The above figures ignore both the costs so far paid by each party and the costs still outstanding. I do not intend to carry out an exercise in accordance with Leadbetter of adding back costs paid on account and then deducting only those costs which would be irrecoverable from the other party unless an order is made for indemnity costs. In part that is because I do not have complete and fully up-to-date information and in part because I have deliberately not broken down the capital into those parts which are the husband's and those parts (namely Little Colstrope and the leasehold interest in Clabon Mews) which are strictly joint. I simply record the facts as up-to-date as they are known to me. As of 19 December 1995 the wife had been billed and had paid £99,856 all of which she has financed by borrowing £100,000 from a bank. Her unbilled costs are a further £72,086 plus, as I have already said, unquantified fees due to Savills and Coopers and Lybrand. By para 9(b) (ii) of his written closing submissions, Mr Singleton submitted that the so-called "irrecoverable costs (Leadbetter) of the wife are such that the wife has debts of #46,000 which should be taken into account when fixing the award." This is a reference to the element of her total costs which would not be recoverable on a taxation on the standard basis. But I specifically decline to take these into account as a debt since that would be in effect to provide for that part of her costs at this stage when I should only do so after judgment when I come to deal with costs. The husband had incurred costs up to 11 December 1995 of £95,827 plus unquantified fees to Coopers and Lybrand, WA Ellis, J Walker, Cluttons and Berwin Leighton. To date he has paid, either in settlement of bills or on account, £89,000. Incomes The wife has none and, as I have already said, in my judgment it is unreasonable now to attribute an earning capacity to her, still less to expect her to take steps to acquire one. The husband's main income is and will continue to be of course from his invested capital. But he continues to maintain an office and to employ an assistant in his endeavour to produce some income from consultancy and other entrepreneurial activities. He currently claims to have annual "business expenditure" of £14,500. His tax returns show profit net of expenses from consultancy of about £26,000 in the year ending 5 April 1991, £27,700 in 1992, £6,300 in 1993, and £9,000 in 1994. On this basis I attribute a net earned income (before tax) of £10,000 per annum for a period of a further six years by which time I see no reason why he should not fully retire if he wishes to do so. Financial obligations and responsibilities Although the husband has continued to meet considerable expenditure on P, particularly in relation to her horses, she is now 22, working full-time and the beneficiary under a trust set up for her by the husband and now worth about #400,000. For the purpose of assessing the wife's claims it would in my judgment be wrong to regard P as a continuing financial obligation or responsibility upon the husband. It is also in my judgment wrong to regard the wife as having any continuing financial obligation or responsibility towards P, and in particular wrong to regard the wife as needing a home with sufficient land and stabling to keep P's horses. I thus regard the husband and wife as having no financial obligations and responsibilities save to each other. Neither party has any relevant physical or mental disability and there is no loss of pension or other benefits to either party of the kind contemplated by paragraph (h) of s.25(2) of the Matrimonial Causes Act 1973. I have thus now referred to and taken account of all the factors listed in s.25(2) of the Matrimonial Causes Act 1973 other than the very important factors of the standard of living enjoyed by the family before the breakdown and of the needs of each party. These have been the subject of much evidence and much dispute. Standard of living I intend to deal with this fairly shortly. In my judgment the standard of living was that of a comfortable, middle class family who made good use of the husband's means when they wished to do so but who were neither luxurious nor extravagant. For most of the marriage they lived in Brackenmoor which was a comfortable, commodious, but not excessively large, quality house with privacy and a nice garden in a good area in Virginia Water. Recently, of course, they moved to Little Colstrope in which they have invested altogether about £1.4m. But I do not regard that house as a true measure of the standard of living taking the marriage as a whole. From 1982 they had the use of a London house at Clabon Mews, albeit that the wife herself only rarely stayed there. They were able to indulge P's interest in riding and to buy and maintain ponies for her. They were able to and did engage in their respective sporting interests of tennis in the case of the wife and golf at a good club and, rather expensively, shooting in the case of the husband. They went on occasions, but not immoderately, to the theatre or similar entertainments. They dined out when they wished but not usually particularly expensively. They each had cars, latterly of the Range Rover or Mercedes type. The husband's guns are by Purdy. He built up a pleasing but not extravagant collection of marine and other water colours and paintings. The wife had the benefit of daily staff in the house and in the garden. (I do not mean every day, but on a day rather than living-in basis). They were able to enjoy good but not normally luxurious holidays abroad. In addition, the husband skied in the winter, sometimes with the wife, and the wife also visited her family in Finland. They enjoyed the security of knowing that there was quite substantial capital available to them if they needed it. Needs The reasonable needs of the husband are neither more nor less than those of the wife. But as I intend to leave him with a substantially greater share of the capital than I award to the wife, and as for a period, as I have indicated, he continues to have some capacity to earn income which she does not, I can concentrate on the needs of the wife confident that what I leave to the husband will meet his own reasonable needs. (i) A home The first clear need of the wife is for a reasonable home. There has been much evidence about a range of alternative homes and of the cost of them. The experts instructed on each side agreed a summary of her housing criteria (see Bundle J page 343 (a)) as being within a radius of about 8 kilometres of Hambleden (with a little flexibility); in a rural, semi-rural or village situation; of period or more modern character (eg. 1930s) but of pleasing appearance; having three bedrooms with a minimum bedroom floor area of 480 square feet, an en suite bathroom to the main bedroom and a second bathroom; a large kitchen, two reception rooms, downstairs cloakroom; central heating; a garden with privacy and room for a portable sauna and garage; in a quiet position away from noisy or busy public roads; and in good condition or capable of so being. I agree with those criteria. The experts disagreed on whether she should have a swimming pool. But in my judgment she should be able to do so either by buying a house with one already installed or by buying a house with suitable land and installing a suitable swimming pool which would cost on the evidence about £20,000. Using those criteria, Mr Tuely of Cluttons, on behalf of the husband, was of the view that an appropriate house could be found within a bracket of £280,000 to £310,000 to which, presumably, should be added #20,000 for a swimming pool which he considered unnecessary but which I consider a reasonable requirement. Mr Adams-Cairns of Savills, for the wife, considered that such a property (including a swimming pool) would cost between £440,000 and £475,000. There was a marked difference between their approach to the valuation exercise into which I do not propose to enter. Mr Tuely considered that of the properties considered by him the two which best matched the wife's requirements were Bassett Shaw at Checkenden and Longwood at Witheridge Hill, Henley. Bassett Shaw was actually sold in July 1994 for £335,000. Longwood is under offer at £290,000, but Mr Tuely said that about £15,000 would need to be spent on Longwood whereas Mr Adams-Cairns thought (I thought more realistically) that as much as £100,000 might need to be spent on it. In my judgment neither of these properties without extension and much improvement properly matches the reasonable requirements of the wife. I was initially attracted by Bassett Shaw on the basis of the sale particulars, but when I saw other photographs taken by Mr Adams-Cairns it was clear that this is a more modest and unassuming house than at first appeared. Indeed, the new owners propose to spend around £60,000 on it so it will finally have cost them £400,000. Further, it is crucial to the approach of Mr Tuely that the wife is able to take time, possibly as much as 18 months to two years, in order to find a suitable home: see paras 5.2 to 5.4 of his report at Bundle C page 292. But in my judgment this wife does not have that sort of time available. Little Colstrope is likely to sell quite quickly and she needs to be able to go out into the market and buy now. Mr Adams-Cairns' report at App 8 (Bundle C page 219) includes a schedule which was used in part to suggest that there is a gap in the market between properties up to about £300,000 and then properties over £450,000. But I was unconvinced by this. Taking an overall view of the evidence in relation to alternative properties, I am satisfied that a reasonable home which broadly satisfies the criteria mentioned above, including a swimming pool, can be purchased without significant delay for £440,000 to which I add a further £25,000 for the costs of moving, some refurbishment and some alterations or redecorations to Mrs F's taste. I thus consider that the wife can be appropriately re-housed for £465,000. That figure stands in a reasonable relationship both to Brackenmoor which was sold in 1994 for £525,000 and to the freehold value of £625,000 of Clabon Mews which I understand that the husband intends to continue to use as his London home together with purchasing a cottage in the country. (ii) Contents It has been sadly characteristic of this case that a feud has continued to the very end in relation to contents, often in relation to some very small items. Even after the close of all the evidence and argument, and during the period in which judgment was reserved, a further 50 pages of schedules and correspondence has been created in relation to the issue of contents. This morning, before I was able to give judgment, we have had to spend a further period of between an hour and an hour-and-a-half trying to sort out contents. The upshot is that as a schedule to the order the wife will receive the specific items of contents in a list attached to a letter from Manches & Co. dated 10 January 1995 headed "List of Items Offered by Mr. F", subject to various amendments which were made to that list this morning. In addition the wife will receive the specific paintings and water colours offered by the husband in a list headed "Paintings List" which is schedule number 3 to a letter from Messrs. Adrian JG Pelman, his solicitors, to the court dated 9 January 1996. So when the schedule is exhibited to the Order it must have those particular paintings added to it. Even if the wife has all the items referred to in those two lists it does leave obvious gaps in her needs. I accept the submission this morning on the part of the husband that to some extent the wife has rejected items offered by him and asked instead to have further money with which to buy similar or substitute items. For example, she rejects the offer of the washing machine at present in Little Colstrope and wishes to buy a new one. Even so, in my judgment there are gaps which she will need to fill by purchasing. Viewing the position in relation to contents as a whole, I propose to allow for the wife a further £3,000 with which to buy a dinner service, £6,500 with which to buy suitable dining room chairs, £1,500 with which to buy kitchen equipment and utilities, and £9,000 for other furniture, lamps and rugs generally. Those figures total £20,000. In addition she is likely to have to provide some, at least, curtains and carpets for her new home for which I propose to provide £10,000. Finally, in my judgment the total number of pictures offered by the husband to the wife does not yield to her a fair proportion of the whole. On the husband's own figures the pictures which he is keeping for himself are worth somewhere over £20,000 whereas those which he offers to the wife are worth just over £5,000 plus the value of some watercolours. In my judgment it would be reasonable for the wife to have in her hands a further £5,000 with which to buy some more pictures. Thus, in addition to the items of contents and pictures on the lists to which I have referred, I ascribe to the wife £35,000 in order fully to furnish and equip her new home. (iii) An Income Fund (a) Annual need The starting point has to be a consideration of the wife's reasonable annual income needs. The attitude of judges to budgets notoriously varies. There are those who regard them as little more than advocacy or "flourishes of the lawyer's brush", to quote a vivid phrase of Wilson J, and there are those who find them a useful tool. Personally, I regard them as an important starting point. Of course they do tend to be produced by lawyers and accountants, and often that is inevitable since the wife may have no personal experience of budgeting, at any rate in her changed circumstances as a single person. Of course many given figures in a budget can be dismissed as figures taken out of the air. But at least they provide some calculated and reasoned basis for the overall figure which otherwise is even more taken out of the air. What should be avoided by lawyers on both sides is an unrealistic attempt to over or under-state the figures as the case may be. The wife's advisers have produced a schedule of estimated annual expenditure starting at Bundle J page 114 and amplified by a detailed breakdown of the figures starting at Bundle J page 116(g). The claimed total is £43,289. The husband says that this is far too high and claims (a) that the parties never lived at the level proposed on behalf of the wife, and (b) that his own proposed reasonable expenditure is far less. He proposes a budget for the wife of £25,000-£26,000 (see Bundle J page 116(a)-(f)) and for himself of just under £36,000 (see the total of £38,505 at Bundle C page 141 from which I have deducted the £2,700 referable to his father). But the husband's own "Analysis of expenditure 1994" at Bundle C page 132-135 clearly shows personal expenditure by the husband of at least £80,000 in that year after deducting legal costs, pension payments and support for his father, but adding back part of the out-goings on Clabon Mews and some other of the expenditure under his heading "Joint". He describes his "normal shooting costs" at £13,236 and in addition incurred exceptional shooting costs on a safari of £18,000. I have already referred to the fact that he has clearly spent more on his several holidays this year with Angela F than he suggests in his schedule at Bundle F page 389. In any event that schedule totals £4,330 against a figure of £2,000 in his budget for himself at Bundle C page 141. Using the wife's budget at Bundle J page 114 (which is very comprehensive) as a basis I make the following comments. The suggested amounts of £800 for each of the telephone and electricity and gas seem high, and I would reduce the combined total for these three items by £500. £10,400, or £200 a week, for food and housekeeping for a single person seems unnecessarily high, and I would reduce this item by £2,600 (ie. to £150 a week). I would reduce the clothes allowance from £4,000 to £3,000; entertainment/subscriptions from £2,500 to £2,000; travel/holidays from £5,000 to £4,000 and presents/miscellaneous from £2,000 to £1,000. These deductions total £6,600 which would reduce the claimed total to £36,689. But there are other items which may be regarded as on the generous side. For example, provision of £10,000 for entirely redecorating the interior of the house every seven years, provision for a gardener for a whole day every week, or (although a trifling sum) provision for a window cleaner as often as once a month. Viewing the budget and the facts of the case in the round, and emphasising that how she apportions her available spending money is of course a matter for the wife, I consider that a reasonable net income requirement for the wife is £36,000 per annum. (b) Income Producing Fund I cannot stress too strongly that I regard a Duxbury calculation as a starting point or guide and in no way as determinative of an appropriate capital award in lieu of maintenance. In particular it is well known that the Duxbury approach can have a very distorting effect both in the case of a relatively young wife after a relatively short marriage and in the case of a relatively old wife after a long marriage. In the former case it produces too high a figure in proportion to the length of the marriage. In the latter case it may well produce a rather low figure which fails adequately to reflect a long marriage. It happens that in this case the age of the wife (and hence her assumed life expectancy) and the length of the marriage are each such that the Duxbury approach does produce a reasonably proportionate figure. The method of the Duxbury approach is now far too deeply engrained in matrimonial practice for me to need to describe it, and figures have been produced in this case which it is agreed reflect, mathematically, the conventional approach (including making provision for receipt by the wife of the State old age pension to which she will be entitled when she is aged 60). There is only one area of dispute, namely as to the real rate of return which should be assumed. The real rate of return is found by adding the assumed income yield and capital growth and deducting the assumed rate of inflation. In the present case the husband contends for an assumed real rate of return of 5 %. When he prepared and opened the case Mr Singleton contended for 4.25 %. However, once it was clear that the real rate of return would be a live issue he was emboldened to submit that I should take a real rate of return of as low as 3 %. The effect of these different proposed rates on a Duxbury calculation based on £35,000 net need (for which I have precise figures available) is as follows. If the assumed real rate of return is 3 % then a capital sum of £621,452 is needed, if 4.25 % then the capital sum is £556,810, and if 5 % then the capital sum is £508,160. So the difference between 3 % and 5 % is to reduce the required capital by over £100,000. In support of 5 % the husband called Mr Mainz of Coopers and Lybrand, it being agreed that this involved no conflict of interest with the involvement of other members of that firm on behalf of the wife. The distinction of Mr Mainz in this field is well known to me and to any lawyer experienced in the field of larger financial cases. He is a partner of Mr Lawrence who, I believe, originally devised the Duxbury calculation and who has given evidence about it in many cases. Mr Mainz stressed, of course, that his views and the evidence which he gave are his own and that there is no "official" Coopers and Lybrand view. I entirely accept this. But in other cases Mr Lawrence has contended for 4.5 % and it cannot be conducive to a consistent approach that the evidence in a case depends not merely upon which firm of accountants is instructed but upon to which partner in the litigation support team of that firm a particular case happens to be allocated. Nevertheless, in the present case the expert who gave the evidence was Mr Mainz and I must consider his evidence. It is relevant to stress that Mr Mainz does not base his evidence or his view on any recent market or economy changes. In other words, the data which underpin his view, and accordingly his conclusion that 5 % should be taken as the assumed real rate of return, is just the same now as it would have been, say, a year ago. Although many Duxbury calculations assume that capital growth and inflation will be the same, so that any dispute revolves around yield, it is actually in the area of growth that Mr Mainz contended for the higher real rate of return in the present case. By his report dated 15 November 1995 (Bundle C page 124(f)) he selected and proposed income yield of 4 %, inflation of 3 % and capital growth of 4 %. The Financial Times All Share Index is currently and historically showing a dividend yield of around 4 %. But he says that a well managed fund should achieve annual growth which is 1 % higher than inflation. Mr Mainz produced tables (Bundle C page 124(j) and (h)) showing the level of the Financial Times All Share Index over a 30-year period since 1965 and also in the shorter period from 1983 to date. The latter table shows an overall increase in the value of the shares which, after adjusting for inflation, is the equivalent to a real increase of about 7 %-8 % each year. However, some provision then needs to be made for commission and dealing costs, and he concludes that a well managed fund should comfortably be able to produce an average growth of 4 % and hence on his figures an overall real rate of return of 5 %. He says that to go below a real rate of return of 5 % is "an unusually low target for a competent portfolio manager". By reference to the 30 year table he suggests that one needs to go back to the mid-1970s for really serious falls in the value of shares such as markedly to reduce his proposed rate of growth. But in fact even the table from 1983 shows some bad as well as some extremely good years. Thus, although the year to 31 December 1989 saw a real gain of 22.31 %, the following year saw a real fall of 23.61 %. In my view Mr Mainz's proposed real rate of return assumes an unacceptably high degree of risk for a woman in the position of Mrs F for whom (at least notionally) her invested capital sum is her sole source of income for the rest of her life. Mr Singleton's alternative contention of an assumed real rate of return of 3 % is based not on expert evidence but on submissions based on recent developments in the field of damages for personal injuries. Since 1981 it has been possible to make a risk-free investment in Index-Linked Government Stock (ILGS) whose capital growth and yield at any time are adjusted to match the rate of inflation as established by the Retail Price Index. The return on ILGS is approximately 3 %. The "Ogden Tables" (whose admissibility in actions for personal injury is now put on a statutory footing by s.10(1) of the Civil Evidence Act 1995) are based on the return provided by ILGS, namely 3 %. It is, however, important to record the reasoning of the Ogden Working Party in their introduction to the Tables where they state: "The Working Party concluded that the following arguments could not be faulted. The courts seek to put the wage-earner or, if he has been killed, his dependant into the same financial position as if the accident had not happened. Investment policy, however prudent, involves risks and it is not difficult to draw up a list of blue chip equities or reliable unit trusts which have performed poorly and in some cases disastrously. Index Linked Government Stocks eliminate the risk. Whereas, in the past, a Plaintiff has had to speculate in the form of prudent investment by buying equities or 'a basket' of equities and gilts or a selection of Unit Trusts, he need speculate no longer if he buys Index Linked Government Stock. If the loss is, say, £5,000 per annum he can be awarded damages which, if invested in such stocks, will provide him with almost exactly that sum in real terms ... For these reasons the Working Party concluded that the fairest approach to the problem is to work on the basis of multipliers calculated upon the basis of presumed investment in Index Linked Government Stock." In the recent personal injury case of Thomas v Brighton Health Authority in which he gave judgment (of which I have a transcript) on 7 November 1995, Collins J adopted the same approach. It is important to note that the case concerned damages for a seriously injured child, now aged six, whose capacity to fend for himself will be gravely impaired for the rest of his life (whose expectancy was treated as being a further 54 years to age 60). At page 11 of the transcript Collins J said: "The purpose of an award of damages in a case such as this is to provide for the Plaintiff a sum which will cover his anticipated needs and compensate him for his loss of earnings until death or retirement. The exercise is carried out by applying a multiplier based on the number of years the sum, if invested at X per cent, will last. It represents the capital value of an annuity certain for the period in this case of 54 years until the Plaintiff reaches the age of 60." At page 14 he said: "... the evidence before me persuades me that consistently with the requirement that damages should compensate and provide so far as possible that the Plaintiff is put into the position he would have been in but for the defendant's negligence, it is right to take account of the ILGS." At page 15 he said: "I am not impressed with the argument espoused by Mr. Dickerson that the prudent plaintiff will invest in equities and obtain 4 per cent-5 per cent. So long as the courts assume such an investment in fixing the multiplier plaintiffs will be forced to invest in that way to prevent the money running out. The argument is thus circular. The court will not consider what an individual plaintiff may choose to do with his money. He may decide to seek a larger return, but at least the sum available should be sufficient to cover the risk involved in doing so." In my view, even if that be the correct approach in personal injury cases, there are a number of reasons why it does not follow that an assumed real rate of return of 3 % should also be adopted for the purpose of Duxbury calculations in matrimonial ancillary relief cases. First, as Mr Mainz said, the methodology of the Duxbury calculation differs markedly from that in personal injury cases which still depend on the application of a multiplier. Secondly, personal injury cases may often involve very long periods of "dependency" (eg. in Thomas itself there was an expectancy of a further 54 years) Mr Mainz commented that it is an overly prudent policy to contemplate investment entirely in ILGS for the lesser time scale of up to, say, 30 years that are usually involved in matrimonial cases and are involved in this case in which the life expectancy of the wife is about 26 years. Thirdly, the premise in personal injury cases as reflected in the passages from the Ogden Working Party and in the judgment of Collins J which I have quoted above, is that a person who has been injured by tort should be put in the same position so far as possible as if the tort had not happened. He should not be expected to have to assume any risk at all. I do not consider that the same premise applies in the typical matrimonial case where, during the marriage, the finances of the parties may usually be at some risk from the vicissitudes of life. Certainly in the present case the main source of the family's income for some time has been the investment portfolio in Goldman Sachs which certainly has not had the freedom from risk of ILGS. The husband will no doubt continue to invest in a similar sort of way. I do not consider that I should assume for the wife a totally risk-free investment. I thus reject each extreme of 5 % and 3 % for the reasons given above. But in addition there are positive reasons based on consistency of approach why I should select an assumed real rate of return of 4.25 %. I stress that there may from time to time be cases whose particular facts justify a higher or lower assumed real rate of return and expert evidence in support thereof. An obvious example would be if a wife was going to live aborad and might accordingly reasonably be expected to invest there. Another example might be if a wife was so old or incapacitated that she could not reasonably be expected to give any management at all to her income producing fund. Another example might be if the wealth and security of the husband was so great that the wife could indeed be expected to be free from all risk (although in the case of F v F (Ancillary Relief: Substantial Assets) [1995] 2 FLR 45 I understand that calculations were used reflecting a real rate of return of 4.25 %). But none of these particular considerations apply to this case. Evidence would also of course be justifiable if there is a relevant change in market or economic conditions. But, as I have said, the evidence of Mr Mainz in this case was not based on any such change but based indeed on an appraisal of the last 30 years. Leaving aside special considerations, in my judgment it is not desirable that in case after case time should be taken up and expense incurred in having one (as in this case) or even two (as in many other cases) experts give evidence about an appropriate assumed real rate of return. This is all the more so when, as cannot be stressed too strongly, a Duxbury calculation is merely a starting point or guide to one component of an overall lump sum award upon which all the s 25 considerations impact. Although I am a member of the editorial committee of "At A Glance" I was not the author of "Reflections on Duxbury" to be found at the beginning of the 1995 edition. But I agree with its reasoning and its conclusions. In my view it is important that there should indeed be "an industry standard" for the purpose of the Duxbury approach and in my experience that standard has already settled at around 4.25 % although as long ago as B v B [1990] 1 FLR 20 Ward J in fact adopted the slightly lower real rate of return of 4 %. A Duxbury calculation in this case, using a real rate of return of 4.25 %, produces a capital sum of about £575,000 for an assumed net income need of £36,000. (iv) A Car On the evidence the wife requires £18,000 with which to purchase a suitable new car. The car which she presently uses has a trade-in value of £4,500. So on the basis that that car is transferred to her she needs a further £13,500 for a new car. An Overview of the Case Thus far I have identified the following capital needs: (i) £465,00 for buying, refurbishing and moving into a new house, (ii) £35,000 for additional contents, (iii) £575,000 for an income fund on a strict application of the Duxbury approach as already discussed, and (iv) £13,500 for a car. Those figures total £1,088,500. But it is important that I now take an overall view of all the s.25 factors and of the case generally. "Needs" is only one of the factors. The length of the marriage, the overall resources and all other factors need to be brought into just proportion. In my judgment a final award which is fair and just to both parties is £1,100,000. The additional £11,500 above what I have identified above may be viewed as a margin in case I have erred in my assessment of any of the individual components of the award or as extra provision of the Besterman type. But in addition, in my judgment, that final figure of £1.1m represents a just overall proportion of the assets in the context of this case and one consistent with many decided cases. It is just under one-third of the total assets which I have assessed as being around £3.4m. There is of course no magic in one-third or any other proportion, but I see no reason why in this case, after this marriage, this wife should receive less than that. The husband will be left with £2.3m less any costs that he is ordered to pay. The justification for the fact that he will remain substantially better off than the wife is that the wealth results from a business which he had started even before the parties met, to which she has contributed nothing, and which prospered due to his acumen and effort. I will hear submissions as to detailed arrangements for payment of the lump sum and for interim provision. If the husband is willing to pay £1.lm straightaway and the wife to vacate then I shall make an order in that precise sum in full and final settlement. If, however, he wishes to pay it out of the proceeds of sale of Little Colstrope then I agree with the approach in para 9(c) (i) of Mr Singleton's written closing submissions that an element of the lump sum in addition to the £1.lm should be one-half of the amount if any ("the excess") by which the gross proceeds of sale of Little Colstrope exceed £1.2m (its present agreed value) less one-half of the costs of sale referable to that excess. This will properly reflect the wife's existing half-interest in the property, protect her against any rise in house prices and give the parties an equal incentive in getting the best price reasonably obtainable. The husband will need to continue to pay all the outgoings until completion of the sale and to make interim periodical payments at the rate of £1,250 per month to cover the wife's personal expenditure. In addition, the lump sum must bear interest at the rate of 8 % per annum if not paid in full within six months. As a further alternative, I will consider any submissions that the wife's claims for ancillary relief be disposed of by the transfer of Little Colstrope to the wife now upon payment by her to the husband of £64,000, being the difference between £1.lm and the agreed equity. Such an order would give her the benefit of total control of the sale but would of course mean that she had to finance the running of the property until completion of sale. The wife has an existing interest under the Zenith Trust under the terms of which the funds pass to her absolutely after the death of the husband. Plainly she cannot continue to benefit from that interest after the lump sum has been paid to her. However, as Coopers and Lybrand point out at paras 27-33 of their report of 9 November 1995 (Bundle C page 167), numerous tax consequences will flow depending on how her interest is disposed of. She must accordingly agree to assign or relinquish her interest under the Trust in whatever way is requested by the husband and is most tax effective; upon the cross-agreement of the husband to indemnify her against any liability to Capital Gains Tax to which she may be exposed as a result of such assignment or relinquishment. DISPOSITION: Judgment accordingly SOLICITORS: Adrian J G Pellman; Manches & Co